A driver takes a break beside his bus while fixing the brakes on the outskirts of Caracas.Photographer: Manaure Quintero/Bloomberg

27

Jun-2016

Venezuelans ‘Live to Repair’Following Collapse of Car Industry

Dollar shortages mean even scrapyards are running out of parts

Recent deals may point to revival in local car manufacturing

Adolfo Bolivar has lived most of his life on the road, navigating Caracas’ traffic-choked streets as he shuttled bus loads of passengers across town. Lately, though, the 60-year-old-driver -- like the majority of his co-workers -- spends his days stalled on the city’s outskirts, bent over a greasy engine block, trying to get his battered minibus back on the road.

“We used to live to drive, now we live to repair,” he said.

In a country with more oil than Saudi Arabia, Venezuela has long boasted the world’s cheapest gasoline, costing just a few cents to fill up your tank. Fewer and fewer consumers can take advantage of those prices though, as the country’s aging fleet of cars, trucks and buses is slowly grinding to a halt.

Bus lines are operating at half capacity, and families are abandoning their cars as even scrapyards run out of the spare parts needed to keep vehicles on the road. At the same time, the shortage of dollars has pushed new car prices beyond the means of all but the wealthiest Venezuelans.

It isn’t just cars. Years of economic mismanagement, coupled with a slump in the price of oil -- Venezuela’s only significant source of income -- has led to shortages of everything from bread to medicines. That has left people with little choice.

“It’s preferable to sacrifice your car than your stomach,” said Rafael Riera, a 64-year-old accountant who lives in Guatire, a Caracas commuter town. For two months he’s had his 2008 Chevrolet Aveo on blocks, unable to afford replacing the radiator and tires, let alone buy a new car.

While the industry’s estimated installed capacity stands at about 250,000 a year, just 331 new cars were produced in the country last month, according to the Venezuelan automobile association, Cavenez. It’s a far cry from 2007, at the height of the oil boom, when production reached more than 12,000 a month.

Like breweries, food makers and other local manufactures, the dearth of dollars is what’s driving the auto sector’s record-low output.

“The industry has always been been import-based,” said Hector Lucena, a professor of labor relations at the University of Carabobo in Valencia, Venezuela, where he has long studied the auto sector. “Without hard currency, you can’t do anything.”

The government of President Nicolas Maduro has repeatedly said it no longer has the means to attend to the industry’s currency needs. Strapped for cash, automakers are now obtaining greenbacks by their own means.

Used car parts for sale on the floor of a store in Caracas. Photographer: Manaure Quintero/Bloomberg

In what one company executive described as a “survival scheme,” Ford Motor Co. reached an agreement with Venezuela last year to allow them to sell some models in dollars. Under the deal, Venezuelans pay Ford dealers up front in a dual-currency plan: dollars for production materials, which are imported from abroad; bolivares to cover the costs of assembling their vehicle locally.

Fiat Chrysler Automobiles NV, General Motors Co. and Toyota Motor Corp. are about to follow suit after the government allowed them to sell vehicles in dollars.

Toyota plans to restart production lines in August, offering Corolla, Hilux and Fortuner models, spokesman Luiz Carlos Andrade Jr. said via e-mail. Fiat Chrysler reached an agreement with the government last week, and GM is planning to begin assembling some models locally next month, according to people with knowledge of the talks who weren’t authorized to speak about the companies’ plans.

While assembly lines may soon start moving again, few believe the deals are enough to jump start the sector.

“They may breathe some life into companies,” Lucena said. “But everyone one else is stuck at a standstill.”